In investing, there is a time to get defensive and a time to get aggressive.
I have admittedly been encouraging investors to get defensive for a while now, but this has not seemed as relevant or timely as it does today.
The yield curve has inverted again, the stock market hit new highs in 2019, the consumer debt problem has not gone away, and trade tensions are affecting the global economy. There is no telling what the future holds at this point, but we can at least say that the risks and uncertainties are mounting.
So, I continue to recommend loading up on defensive stocks.
Without further ado, let me start with two defensive stocks that operate in the retail industry and that have been clear winners for investors over the long term.
Still trading near all-time highs at the time of writing, Couche-Tard (TSX:ATD.B) stock looks to be on solid footing. It is a defensive name that has a proven, impressive history, and a future that will see it be relatively immune to economic woes and hardships.
With a global network of 10,000 stores globally, Couche-Tard provides investors with exposure to a successful convenience store and fuel retailer with a history of growing profitably, both organically and via acquisitions.
Strong cash flows is one of the key characteristics of the company’s business model, as demonstrated by the company’s free cash flow generation (excluding acquisitions) of approximately $3 billion in the last three years, its 8.6% five-year compound annual growth rate in operating cash flow, and its respectable free cash flow margin of over 2%.
The company has more opportunity to achieve incremental synergies from its many prior acquisitions, and it benefits from global diversification and scale.
Metro (TSX:MRU) is the prime example of consistency and reliability in the retail environment today. Strong merchandising and execution have characterized this company’s operations and results over the years, and this has resulted in consistent dividend increases and solid capital gains for shareholders.
The annual dividend was increased by 16% in 2017 to $0.65 per share, by 10.8% in 2018, and by 11% in 2019 to the current $0.80 per share. The dividend yield currently stands at 1.62%.
It is stocks like these that I think investors will bid up as they look for more defensive, reliable stocks to add to their portfolios today and in the future, as the economic backdrop becomes more uncertain and, dare I say, negative.
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Fool contributor Karen Thomas has no position in any of the stocks mentioned. Couche-Tard is a recommendation of Stock Advisor Canada.